Despite the market’s positivity following U.S. elections and rate cuts, uncertainty still looms over investing in 2025. Concentration risk and a potential AI bubble pose counterpoints to optimism in the new year, especially if inflation, too, remains a stubborn problem. With many investors moving out of cash amid that uncertainty, it may be worth looking at the benefits of equal weighting stocks. An equal weight ETF like EQL, for example, could provide a route into equities with reduced levels of overall risk.
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The ALPS Equal Sector Weight ETF (EQL ) tracks the NYSE Select Sector Equal Weight Index. EQL charges 25 basis points (bps) for its approach, going back to its launch in 2009. EQL provides an equal sector approach to the market. While a market cap-driven approach can get the highs from the stock market, it also exposes investors to significant lows.
Equal Weight ETF Investing Could Intrigue in 2025
Should, for example, a tech space heavily exposed to AI see a related bubble burst, most market indexes would suffer given tech’s huge presence. An equal weight ETF might limit upside, but it also limits downside. In a broadly positive economic environment, such a strategy can still appeal as a steady performer. Those in cash, but wanting equities exposure, might see such a strategy as a bridge to other ETFs, then.
EQL could offer investors that bridge. The equal weight ETF has returned 29.5% over one year with its equal weighting approach per SS&C ALPS Advisors data. Since inception, the fund has provided a steady 13.6% return, as well. EQL’s price sits above both its 50 and 200-day Simple Moving Averages (SMA) per YCharts data. Its tech chart, then, indicates some appealing momentum. Overall, it may present a potent entry point for investors looking to 2025.
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